4 red hot stocks: Should you buy?

Worthy of a buy – or overpriced?

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The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has added just 3.5% since the beginning of this year, making it difficult for many investors to achieve double digit returns.

If you add on dividends of around 4%, that means an annualised return of around 7.5% if the index stays flat until December. Now 7.5% is not bad and could see investors double their investment within 10 years, but for those of us striving for something above 10%, picking growing stocks is almost mandatory.

Here are four stocks that have investors frothing at the mouth…

  1. Liquefied Natural Gas Limited (ASX: LNG) has rocketed up 771% since the start of the year. But with a market cap of $888 million, LNG may still be underpriced if it can get its US Magnolia LNG plant into production by 2018 on time and on budget.
  2. Vocus Communications Limited (ASX: VOC) shares have sunk from $5.80 in early July to around $5.03 currently. A recently renewed contract with Vodafone New Zealand at lower prices, resulting in a hit to earnings of around $4.5 million is most likely to blame. But with medium to long-term ongoing demand for its services and products, now could be the perfect time to dip your toe into Vocus.
  3. Starpharma Holdings Limited (ASX: SPL) has had two recent wins, with the share price subsequently surging 28% in the past week. FDA agreement for its phase 3 clinical trials of the company's VivaGel product was received on July 14. Then on July 21, Starpharma received certification from the Australian Therapeutic Goods Administration (TGA) for its VivaGel condom, marketed by its partner, Ansell. Starpharma is one for the watchlist.
  4. Lynas Corporation Limited (ASX: LYC), the struggling rare earths producer has recently implemented a plan to cut its costs, in a bid to become cash flow positive. But with millions of dollars of debt and rare earths prices in the doldrums, Lynas still has a long way to go before it gets there.

In summary, the first three look interesting and worthy of adding to the watchlist. For an even better bet, you need to check this out…

 Motley Fool writer/analyst Mike King owns shares in Vocus. You can follow Mike on Twitter @TMFKinga

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